There are several advantages to learning budgeting as a skill. In fact, the practice of budgeting far outweighs any possible disadvantages – due to its nature as a simple form of common sense alone.
Simply put, Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget.
As individuals and business owners, we sometimes want/need/or choose to spend our income on things we cannot truly afford.
Or sometimes, we spend money we do not actually own (credit cards & loans) without a real plan. As a result, we run the risk of falling further into debt just because we do not have a set plan to manage our money.
Whatever our reasons may be to spend money, it is always very good practice to create a budget. Because without it, you will never truly know how much money you are earning and how much you are spending. And that, my friend can cause some serious problems.
This article will briefly outline 7 reasons
Why Budgeting is a necessary skill for your personal life and your business.
1. Helps you Achieve Your Set Goals.
Having a budget helps you be more accountable.
By knowing how much money you are spending on each project, you stay on track and allocate the right amount of money to the right tasks.
If you cannot do so daily, it is very advisable to track your budgets at least on a weekly or monthly basis.
2. Avoids Unnecessary Debt.
As an individual, a budget will help you to avoid unnecessary borrowing, since you will only spend the money that you have. And because you will spend it in a smart way, that also means you will find a balance between saving, spending for leisure and spending on your obligations. This is only true though, if you stick to it through discipline.
Understandably, for a small business to scale, sometimes debt (bank loan) is a very good source of finance. But regardless of whether you want to buy new equipment for your business through profits or loans, a budget will always make sure you work well within your means.
3. Helps Save for Emergencies.
Since time immemorial, unforeseen circumstances happen to us whether we want them to or not. So it is important to have money set aside for that.
Hence, budgeting helps you allocate some money aside on a regular basis for those rainy days. This will come in handy when disaster strikes, either in your business or your personal life.
4. Keeps You in Control.
Budgeting helps you to be more in control of your money, ie. it helps you track down your expenses and highlights when you need to adjust your spending.
The peace of mind that comes with such control, allows you to make very well-informed personal and business financial decisions.
5. Easy to get Funding.
Let’s say you need more financial support for your current business – and the lender asked to see your bank accounts and statements. If you maintain good budgeting practice, they will clearly see from your accounts that you pay all your bills on time. They will also see that you do not have negative balances.
This creates trust and increases your chances to get the funding you require. Also, if your business is a new business, lenders are more likely to fund you if your proposal is not guesswork. A proposal that includes well thought-out budgets, cost and income projections is more likely to be funded.
6. Notice Irregularities at a Glance.
Budgeting is a necessary skill for your business because you will notice if there is unusual activity. By comparing your previous budgets, you can pick recording errors, unusual spending, or fraud and act on them as soon as possible.
7. Builds Wealth.
Having a budget helps in building wealth. This is because profits made as a result of good budgeting practice, can be reinvested into the business so as to make you more money.
There you have it. 7 simple reasons why you should make budgeting a skill in 2022. What other advantages to budgeting can you think of? Feel free to share down below 🙂
2 thoughts on “7 Simple Reasons Why Budgeting is Important.”
Nice one..Budgeting helps to balance out times of heavy annual bills falling due. Just been landed with unexpected property tax and home insurance.
Agreed… and ouch! I hope that does not interfere with any holiday plans you may have for the summer?